Internet have changed our lives, the way we consume news and media, buying clothes, navigating on the roads, traveling and many others. Major consumer tech brands have moved much beyond the original tech services. These vendors are heavily involved into online economy.
Recent article by Chris Dixon on Medium – The Internet Economy speaks about the main loop of online economies. The following picture can give you an idea of what is that.
Here is my favorite quote from the article:
When evaluating an internet company’s strategic position (the defensibility of its profit moat), you need to consider: 1) how the company generates revenue and profits, 2) the loop in its entirety, not just the layers in which the company has products.
You can how all this is related to product lifecycle and manufacturing economy. Here is the thing… Internet is change manufacturing too. It creates new business models and economical loops for manufacturing companies.
Bolt.io blog The 3 Business Models That Matter for Connected Hardware Startups brings an interesting perspective on hardware companies changing business models. It outlines 3 new business types for manufacturing: Hardware as as Service; Hardware enabled services; Consumables. Read about it more in details – you can learn a lot of new forms of manufacturing business.
I found the following passage really interesting:
Every company listed above is really a software company masquerading as a hardware company. The majority of their focus is on the digital aspects of their product and business. Hardware is the enabler. Many have recurring revenue and nearly all have more software engineers than hardware engineers. As software works into the product equation, companies become less susceptible to commoditization. Software services are harder to copy. They can increase switching cost and provide more opportunities to interact with consumers and build brand.
The Internet economy loop and new manufacturing business models made me think, the future of product lifecycle and manufacturing will be different. The demand for digital product lifecycle will be driven by new business models, new economical relationships and new capabilities of manufacturing companies. Future manufacturing companies companies will be looking for online software platforms capable to manage physical products and related services. The customer feedback loop in new manufacturing companies will be similar to consumer tech brands in companies like Google and Facebook rather than in manufacturing factories back 10-15 years ago.
What is my conclusion? Internet and online economies are coming to manufacturing faster than you think. It will change existing product lifecycle and introduce new services and business models. Changes will demand new software and services capable to manage product development process for online services and connected manufacturing products. It will shorten customer feedback loop, demand new way of communication between suppliers and contract manufacturing. It will impact distribution channels. Many of new features will be delivered via software upgrades and not through the hardware sales. This is a future of product lifecycle in Internet Economy. Just my thoughts…
Best, Oleg
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Internet Economics Image credit: Chris Dixon blog
